NMDC May Pay $300 Million for Mozambique, Russian Coal Mines

Jan. 5 (Bloomberg) -- NMDC Ltd., India’s largest iron ore
producer, plans to acquire two coking coal mines in Mozambique
and Russia for about $300 million to feed its planned steel
plants in India.

Talks are on to acquire a mine with 360 million metric tons
of deposits in Mozambique’s Tete province and an 80 million-ton
mine in Russia’s Kemorovo region, Chairman Narendra Kumar Nanda
said today in a phone interview. The company is also considering
buying an iron ore and manganese mine in Brazil’s Amapa province,
he said, without elaborating.

Lack of access to local mines and rising global prices of
coking coal are eroding profits at Indian steelmakers, spurring
them to look for acquisitions overseas. NMDC, which has 210
billion rupees ($4 billion) of cash in hand, is building a 3
million ton steel plant in central India and a similar-sized
plant jointly with Russia’s OAO Severstal in southern India.

“Considering its cash reserves, such acquisitions are like
baby steps for NMDC,” said Rahul Jain, a Mumbai-based analyst
with RBS Equities India Ltd. “The global slowdown has lowered
asset prices and this is a time when the company should approach
bigger targets.”

The shares fell as much as 1.5 percent to 169 rupees and
traded at 170.05 rupees as of 12:34 p.m. in Mumbai. The stock
has declined 39 percent in the past year, compared with a 21
percent drop in the benchmark Sensitive Index.

“We want to be prepared when our steel mills start
operating,” said Nanda, who took charge on Jan. 1. “We can
bring some coal from these mines to our plants and sell the rest
for hedging purposes.”

NMDC expects to appoint advisers by the end of this month
to carry out the due diligence for the assets, he said. The
company recently ended acquisition talks for Greystone Mineracao
do Brasil’s iron ore mine in Brazil and a coal mine in Russia,
Nanda said.

NMDC said in October it signed an accord to acquire a 50
percent stake in Australia’s Legacy Iron Ore Ltd. for A$18.9
million ($19.5 million), its first acquisition overseas.